UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): DECEMBER 29, 2008
DELAWARE 0-13839 06-1123096
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (SEE General Instruction A.2. below):
[_] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[_] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[_] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
ITEM 5.02. DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS
On December 29, 2008, the Board of Directors of CAS Medical Systems, Inc. (the "Company") approved and authorized, and the respective parties executed, amendments to the Company's Employment Agreement with each of Andrew E. Kersey, its President and Chief Executive Officer, and Louis P. Scheps, its Chairman of the Board, to conform each agreement with the requirements of Section 409A of the Internal Revenue Code (the "Code"). The amendments did not expand the scope of benefits payable under the existing agreements with Messrs. Kersey and Scheps.
The amendment to Mr. Kersey's employment agreement primarily clarifies (i) the
timing of the payment of discretionary annual bonuses; (ii) the circumstances
under which Mr. Kersey may be entitled to severance benefits in the event of a
termination by Mr. Kersey for "good reason"; and (iii) the timing of severance
payments and other benefits in the event Mr. Kersey experiences an involuntary
separation from service. Mr. Kersey's severance benefits described in clause
(iii) of the prior sentence have also been revised so that they are only payable
upon an "Involuntary Separation from Service" as defined for purposes of Code
Section 409A.
The amendment to Mr. Scheps' employment agreement provides for (i) a lump sum severance benefit in the event his employment is involuntarily terminated on or after a change of control, provided such change of control and termination occurs on or before March 31, 2009 and (ii) other Code Section 409A required terms and definitions. Mr. Scheps' change of control severance benefits have been revised so that they are only payable upon an "Involuntary Separation from Service" as defined for purposes of Code Section 409A.
The foregoing descriptions of the amendments to employment agreements do not purport to be complete and are qualified in their entirety by reference to the First Amendment to Employment Agreement with Mr. Kersey and Amendment Number Seven to Employment Agreement with Mr. Scheps, copies of which are filed as Exhibits 10.1 and 10.2 hereto, respectively, and incorporated herein by reference.
On December 29, 2008, the Board of Directors of the Company approved and authorized an Amendment to the Company's 2003 Equity Incentive Plan (the "Plan") to conform the Plan to the requirements of Section 409A of the Code. The amendment did not expand the scope or type of benefits payable under the Plan.
The amendment to the Plan is intended to merely confirm that if the Company
issues awards that constitute deferred compensation within the meaning of Code
Section 409A, then the awards will be documented in such a way that the Code
Section 409A requirements are met.
The foregoing description of the Amendment to the 2003 Equity Incentive Plan does not purport to be complete and is qualified in its entirety by reference to the Amendment to the 2003 Equity Incentive Plan, a copy of which is filed as Exhibit 10.3 hereto and incorporated herein by reference.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(d) EXHIBITS - The following exhibits are filed as part of this report:
10.1 First Amendment to Employment Agreement with Andrew E. Kersey
10.2 Amendment Number Seven to Employment Agreement with Louis P. Scheps
10.3 Amendment to the CAS Medical Systems, Inc. 2003 Equity Incentive Plan
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
CAS MEDICAL SYSTEMS, INC.
Date: December 31, 2008 By: /s/ Jeffery A. Baird
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Jeffery A. Baird
Chief Financial Officer
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FIRST AMENDMENT
TO
EMPLOYMENT AGREEMENT
This First Amendment to Employment Agreement (the "First Amendment") is made the 29th day of December, 2008, between CAS Medical Systems, Inc., a Delaware corporation (the "Company"), and Andrew Kersey (the "Employee").
WHEREAS, the Company previously entered into an Employment Agreement with the Employee dated March 16, 2007 (the "Employment Agreement"); and
WHEREAS, in light of changes to the law concerning severance and deferred compensation, including Internal Revenue Code Section 409A and related Treasury Regulations, the Company and the Employee wish to amend the Agreement by this First Amendment to clarify certain provisions in the Agreement.
NOW THEREFORE, the following Sections of the Agreement are hereby amended as follows:
1. Section 5 of the Agreement is amended by the addition of the following at the end thereof.
"Any bonus payable hereunder shall be paid by no later than the 15th day of the third month following the end of the calendar year in which the right to the bonus is no longer subject to a substantial risk of forfeiture (as defined for purposes of Internal Revenue Code Section 409A, including Treasury Regulations Section 1.409A-1(d))."
2. Section 9(b) of the Agreement is deleted in its entirety and the following substituted therefor:
"(b) Termination by Employee for Good Reason. The Employee may terminate his employment and the Term of Employment in the event of "Good Reason." Termination for Good Reason means a resignation of employment and Separation from Service (as defined for purposes of Internal Revenue Code Section 409A) within 120 days following the initial existence of one or more of the following conditions arising without the Employee's consent:
(i) a material reduction in the Employee's base salary or benefits, other than an across-the-board reduction affecting all members of senior management;
(ii) a material reduction in the Employee's duties and significant responsibilities hereunder (not including reasonable changes in title or in corporate structure); or
(iii) a material breach of this Agreement by the Company (which shall include a failure to make payments due hereunder);
provided, in any such case, that (1) a prior written notice specifying the reasons within sixty (60) after the initial existence of the condition and an opportunity to cure such condition (if curable) shall be afforded the Company, and (2) "Good Reason" shall exist only if the Company shall fail to cure such condition within 31 days after its receipt of such prior written notice. In addition, until the actual Separation from Service the Employee must remain willing and able to continue to perform services in accordance with the terms of this Agreement and the Employee must not be in breach of any of the Employee's obligations hereunder."
3. Section 9(e) of the Agreement is deleted in its entirety and the following substituted therefor:
"(e) Effect of Termination Without Serious Cause or With Good Reason. If the Company terminates the Term of Employment and the Employee's employment herein without Serious Cause or the Employee terminates the Term of Employment and his employment hereunder for Good Reason, and, in either case, the Employee's employment is terminated under circumstances constituting an Involuntary Separation from Service within the meaning of Treasury Regulations Section 1.409A-1(n) other than within the period beginning on the date that a Change in Control is formally proposed to the Company's Board of Directors and ending on the second anniversary of the date on which such Change of Control occurs, the Company shall pay the Employee a separation pay benefit (the "Severance Payments") equal to six (6) months of the Employee's annual rate of base salary (as of the Employee's Separation from Service date) and will make available a subsidized healthcare benefit, as described below.
(1) Payment of the Severance Payments shall commence as of the Employee's Separation from Service date, and shall continue thereafter in equal fixed installments over a six month period in accordance with the Company's standard payroll procedures and normal payroll dates then in effect.
(2) In the event the value of the Severance Payments shall exceed two times the lesser of the Employee's annualized compensation or the maximum amount that may be taken into account for qualified plan purposes (in each case, as determined in accordance with Treasury Regulation Section 1.409A-1(b)(9)(iii)(A)), the excess shall not be paid as provided in (1), above, but instead shall be withheld and paid on the first regularly scheduled payroll date immediately following the date that is six months after the Employee's Separation from Service date, without adjustment for the delay in payment.
(3) In no event shall Severance Payments be accelerated, nor shall the Employee be eligible to defer payment of Severance Payments to a later date.
(4) If COBRA continuation coverage under any Company healthcare plan is elected by the Employee, the Company shall provide such coverage on the same terms with respect to employee cost and employer subsidy as was being made available to the Employee immediately prior to his Separation from Service for the period of the COBRA coverage or six months, whichever is shorter.
In addition, the Employee will be entitled to prompt payment of (A) any accrued but unpaid salary and vacation, (B) any earned but unpaid bonus from a prior fiscal year (subject, if applicable, to the terms of any deferred compensation arrangements), and (C) reimbursement of business expenses incurred prior to the date of termination, and all of the Employee's equity-linked grants (e.g., stock options, restricted stock) shall immediately accelerate and vest in full."
4. Section 10(a) of the Agreement is deleted in its entirety and the following substituted therefor:
"(a) Effect of Termination. If the employment of the Employee is terminated by the Company (or a successor thereto) without Serious Cause or the Employee terminates employment with the Company (or a successor thereto) for Good Reason, and, in either case, the Employee's employment is terminated under circumstances constituting an Involuntary Separation from Service within the meaning of Treasury Regulations Section 1.409A-1(n) and within the period beginning on the date that a Change of Control is formally proposed to the Company's Board of Directors and ending on the second anniversary of the date on which such Change of Control occurs, the Company shall pay the Employee a separation pay benefit (the "Change of Control Severance Payments") equal to the Employee's annual base salary (as of the Employee's Separation from Service date) and will make available a subsidized healthcare benefit, as described below.
(1) Payment of the Change of Control Severance Payments shall commence as of the Employee's Separation from Service date, and shall continue thereafter in equal fixed installments over a one year period in accordance with the Company's standard payroll procedures and normal payroll dates then in effect.
(2) In the event the value of the Severance Payments shall exceed two times the lesser of the Employee's annualized compensation or the maximum amount that may be taken into account for qualified plan purposes (in each case, as determined in accordance with Treasury Regulation Section 1.409A-1(b)(9)(iii)(A)), the excess shall not be paid as provided in (1), above, but instead shall be withheld and paid on the first regularly scheduled payroll date immediately following the date that is six months after the Employee's Separation from Service date, without adjustment for the delay in payment.
(3) In no event shall Change of Control Severance Payments be accelerated, nor shall the Employee be eligible to defer payment of Change of Control Severance Payments to a later date.
(4) If COBRA continuation coverage under any Company healthcare plan is elected by the Employee, the Company shall provide such coverage on the same terms with respect to employee cost and employer subsidy as was being made available to the Employee immediately prior to his Separation from Service for the period of the COBRA coverage or one year, whichever is shorter.
In addition, the Employee will be entitled to prompt payment of (A) any accrued but unpaid salary and vacation, (B) any earned but unpaid bonus from a prior fiscal year (subject, if applicable, to the terms of any deferred compensation arrangements), and (C) reimbursement of business expenses incurred prior to the date of termination.
If any portion of the payments which the Employee has the right to receive from the Company, or any affiliated entity or successor, hereunder would constitute "excess parachute payments" (as defined in Section 280G of the Internal Revenue Code) subject to the excise tax imposed by Section 4999 of the Internal Revenue Code, such excess parachute payments shall be reduced to the largest amount that will result in no portion of such excess parachute payments being subject to the excise tax imposed by Section 4999 of the Internal Revenue Code. In the event a reduction must be in accordance with this paragraph, Change in Control Severance Payments shall be reduced to the extent necessary.
The Employee will not be entitled to any benefits or other entitlements under this section unless a Change of Control actually occurs. Any amounts payable pursuant to this Section 10 shall not duplicate amounts payable under Section 9 and vice versa."
5. New Section 21 is hereby added to the Agreement to read as follows:
"SECTION 21. INTERNAL REVENUE CODE SECTION 409A COMPLIANCE.
(a) The parties hereto recognize that certain provisions of this Agreement may be affected by Section 409A of the Internal Revenue Code and guidance issued thereunder, and agree to amend this Agreement, or take such other action as may be necessary or advisable, to comply with Section 409A. The parties hereto intend that the Agreement, as amended, be consistent with IRS Notice 2007-78, IRS Notice 2007-86 and other Internal Revenue Code Section 409A transition relief, and it shall be interpreted accordingly.
(b) Notwithstanding anything herein to the contrary, it is expressly understood that at any time the Company (or any successor or related employer treated as the service recipient for purposes of Internal Revenue Code Section 409A) is publicly traded on an established securities market (as defined for purposes of Internal Revenue Code Section 409A), if a payment or provision of an amount or
benefit constituting a deferral of compensation is to be made pursuant
to the terms of this Agreement to the Employee on account of a
Separation from Service at a time when the Employee is a Specified
Employee (as defined for purposes of Internal Revenue Code Section
409A(a)(2)(B)(i)), such deferred compensation shall not be paid to the
Employee prior to the date that is six (6) months after the Separation
from Service or as otherwise permitted under Treasury Regulations
Section 1.409A-3(i)(2).
(c) For purposes of this Agreement, the following definitions shall apply:
(i) "Separation from Service" means, generally, a termination
of employment with the Company (or any successor or related employer
treated as the service recipient for purposes of Internal Revenue Code
Section 409A), and shall have the same meaning as such term has for
purposes of Internal Revenue Code Section 409A (including Treasury
Regulation Section 1.409A-1(h)).
(ii) "Involuntary Separation from Service" means a Separation
from Service due to the independent exercise of the unilateral
authority of the Company (or any successor or related employer treated
as the service recipient for purposes of Internal Revenue Code Section
409A) to terminate the Employee's employment, other than due to the
Employee's implicit or explicit request, where the Employee was willing
and able to continue to employment with the Company. Notwithstanding
the foregoing, a termination for Good Reason may constitute an
Involuntary Separation from Service. Involuntary Separation from
Service shall have the same meaning as such term has for purposes of
Internal Revenue Code Section 409A (including Treasury Regulation
Section 1.409A-1(n))."
All of the other terms and conditions of the Employment Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have entered into this First Amendment as of the date first above written.
CAS MEDICAL SYSTEMS, INC.
By: /s/ Louis P. Scheps
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Name: Louis P. Scheps
Title: Chairman of the Board
/s/ Andrew Kersey
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Andrew Kersey
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This Amendment Number Seven (the "Amendment") between Louis P. Scheps ("Mr. Scheps") and CAS Medical Systems, Inc. ("CAS") amends an Employment Agreement dated as of September 1, 1993, between Mr. Scheps and CAS, as amended prior to the date hereof (the "Agreement"). Except as otherwise specifically provided in this Amendment, the Agreement remains in full force and effect.
The following replaces in its entirety that portion of Section 3 of the Agreement added by the September 2005 Amendment Number Six of the Agreement.
"If a Change of Control occurs on or before March 31, 2009, and, as a result thereof, Mr. Scheps' employment is terminated under circumstances constituting an Involuntary Separation from Service within the meaning of Treasury Regulations Section 1.409A-1(n) on or before March 31, 2009, Mr. Scheps will be paid a lump sum severance payment in the amount of One Hundred Thousand Dollars ($100,000) within ten (10) days of such Separation from Service. In no event shall such severance payment be accelerated, nor shall Mr. Scheps designate the year of payment or be eligible to defer payment of the severance payment to a later date.
"Change of Control" means (i) a sale of all or substantially all of CAS' assets, (ii) a merger involving CAS in which the CAS stockholders prior to the merger control less than fifty percent of the voting stock of the surviving entity, (iii) a sale by the CAS stockholders to an acquirer or acquirers acting in concert of more than a majority of the then outstanding stock of CAS owned by the CAS stockholders, or (iv) any event similar to any of the foregoing."
New Section 7 is hereby added to the Agreement to read as follows:
7. Internal Revenue Code Section 409A Compliance. The parties hereto recognize that certain provisions of this Agreement may be affected by Section 409A of the Internal Revenue Code and guidance issued thereunder, and agree to amend this Agreement, or take such other action as may be necessary or advisable, to comply with Section 409A. The parties hereto intend that the Agreement, as amended, be consistent with IRS Notice 2007-78, IRS Notice 2007-86 and other Internal Revenue Code Section 409A transition relief, and it shall be interpreted accordingly.
Notwithstanding anything herein to the contrary, it is expressly understood that at any time CAS (or any successor or related employer treated with CAS as the service recipient for purposes of Internal Revenue Code Section 409A) is publicly
traded on an established securities market (as defined for purposes of Internal Revenue Code Section 409A), if a payment or provision of an amount or benefit constituting a deferral of compensation is to be made pursuant to the terms of this Agreement to Mr. Scheps on account of a Separation from Service at a time when Mr. Scheps is a Specified Employee (as defined for purposes of Internal Revenue Code Section 409A(a)(2)(B)(i)), such deferred compensation shall not be paid to Mr. Scheps prior to the date that is six (6) months after the Separation from Service or as otherwise permitted under Treasury Regulations Section 1.409A-3(i)(2).
For purposes of this Agreement, the following definitions shall apply:
a. "Separation from Service" means, generally, a termination of employment with CAS (or any successor or related employer treated as the service recipient for purposes of Internal Revenue Code Section 409A), and shall have the same meaning as such term has for purposes of Internal Revenue Code Section 409A (including Treasury Regulation Section 1.409A-1(h)).
b. "Involuntary Separation from Service" means a Separation from Service due to the independent exercise of the unilateral authority of CAS (or any successor or related employer treated as the service recipient for purposes of Internal Revenue Code Section 409A) to terminate Mr. Scheps' employment, other than due to Mr. Scheps' implicit or explicit request, where Mr. Scheps was willing and able to continue to employment with CAS. Involuntary Separation from Service shall have the same meaning as such term has for purposes of Internal Revenue Code Section 409A (including Treasury Regulation Section 1.409A-1(n))."
All of the other terms and conditions of the Agreement shall remain in full force and effect.
IN WITNESS of the foregoing, the parties have executed this Amendment Number Seven on this 29th day of December, 2008.
CAS MEDICAL SYSTEMS, INC.
By: /s/ Andrew E. Kersey
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Name: Andrew E. Kersey
Title: President and CEO
/s/ Louis P. Scheps
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Louis P. Scheps
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AMENDMENT TO THE
CAS MEDICAL SYSTEMS, INC.
2003 EQUITY INCENTIVE PLAN
WHEREAS, CAS Medical Systems, Inc., a Delaware corporation (the "Company"), previously established the CAS Medical Systems Inc. 2003 Equity Incentive Plan (the "Plan"); and
WHEREAS, in Section 9 of the Plan, the Company reserved the right to amend the Plan; and
WHEREAS, in light of changes to the law concerning deferred compensation, including Internal Revenue Code Section 409A and related Treasury Regulations, the Company wishes to amend the Plan to clarify its intentions with respect to the Plan.
NOW THEREFORE, the Plan is hereby amended by the addition of new
Section 14 at the end thereof, to read as follows:
"SECTION 14. CODE SS.409A COMPLIANCE.
To the extent any Award hereunder provides for a deferral of compensation (within the meaning of Code ss.409A and related regulations), the material terms of the deferral, to the extent required under Treasury Regulation ss.1.409A-1(c)(3) to establish a deferred compensation plan, shall be set forth in the written Award documentation (including by incorporation by reference, if applicable) prior to the effective date of such Award. Such provisions may include a requirement that if any payment or acceleration of a payment is made upon a change of control, the definition of change of control for purposes of such award also complies with the requirements of Treasury Regulation ss.1.409A-3(i)(5).
In addition, whenever it is provided in this Plan or in any Award made hereunder that a payment or delivery is to be made "promptly" after a given event, such payment or delivery shall be made within 10 days of the event and the recipient shall have no right to designate the taxable year of payment or delivery."
IN WITNESS WHEREOF, the undersigned officer has set his hand this 29th day of December, 2008.
CAS MEDICAL SYSTEMS, INC.
By: /s/ Andrew E. Kersey
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Name: Andrew E. Kersey
Title: President and CEO
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